Finance Bill 2013-14 is expected to incorporate the approved slabs of Federal Excise Duty (FED) on cigarettes as proposed by the Federal Board of Revenue (FBR) instead of duty structure framed by the cigarette manufacturing companies. Sources told Business Recorder here on Saturday that the cigarette manufacturers have already made an attempt to incorporate the proposal of their choice in the un-signed Tax Laws (Amendment) Ordinance, 2013 for revision of the FED slabs on cigarettes.
The FBR would now ensure that the FED slabs drafted and dully approved by the Finance Ministry must be incorporated in the Finance Act. During the ongoing exercise of budget making, the tax managers have informed the Ministry of Finance about serious revenue implications in case the slabs prepared by cigarette companies are incorporated in the Finance Bill. As the Tax Laws (Amendment) Ordinance, 2013 was not promulgated, cigarette manufacturers failed to get their own proposal approved in the Finance Bill 2013-14.
According to a senior tax official, the expected revenue collection in 2013-14 from the FBR's proposed slab is much more as compared to the FED structure proposed by the multinational cigarette manufacturing giants. This is a very serious issue and if the proposed slabs of the cigarette manufacturers have been incorporated in the Finance Bill, it would have negative impact on the FED during next fiscal.
The draft of the Tax Laws (Amendment) Ordinance, 2013 revealed amendment in the First Schedule of the Federal Excise Act, 2005 to revise FED slabs on cigarettes. According to the revised FED structure drafted by the cigarette manufactures, the rate of the FED would be Rs 2,325 per thousand cigarettes where locally produced cigarettes if their on-pack printed retail price exceeds Rs 2,286 per thousand cigarettes. The rate of the FED would be Rs 880 per thousand cigarettes where locally produced cigarettes if their on-pack printed retail price does not exceed Rs 2,286 per thousand cigarettes. The said revised FED slabs on cigarettes have been dully incorporated in the Finance Ordinance to be issued for implementation of the new taxation measures.
On the other hand, the FBR has got approval from Ministry of Finance of entirely different FED structure on cigarettes. The approved proposal has estimated to collect Rs 12 billion from cigarette manufactures. As per FBR's proposal, under first proposed slab, if retail price exceeds Rs 50 for 20 cigarettes, rate of the FED would be 65 percent of the retail price. The second proposed slab reveals that if retail price does not exceed Rs 50 for 20 cigarettes, the rate of the FED would be 25 paisa per stick plus 50 percent of retail price. The existing three slabs have been proposed to be replaced with two slabs of the FED on cigarettes. The existing upper-tier slab, middle-tier slab and lower-tier slab have been merged into two simple slabs of the FED.
As a result of the FBR's proposal, the rate of the excise duty would correspondingly increase with the increase in the prices of the cigarettes. This would increase FED collection from the commodity. On the other hand, as per new proposal of cigarette manufacturers, the rate of the FED on cigarettes has been fixed. If the prices of cigarettes would change, the rate of the FED would not revise due to fixation of the excise duty.
Sources said that the FBR had proposed a very simple Federal Excise Duty (FED) structure for levying duty on cigarettes. This proposal was dully approved by the Finance Ministry for revision of the FED slabs on cigarettes. However, a new proposal was recently floated by the cigarette manufactures which was incorporated in the un-signed Tax Laws (Amendment) Ordinance, 2013.
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